Correlation Between John Wood and Fair Oaks

Can any of the company-specific risk be diversified away by investing in both John Wood and Fair Oaks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining John Wood and Fair Oaks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John Wood Group and Fair Oaks Income, you can compare the effects of market volatilities on John Wood and Fair Oaks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in John Wood with a short position of Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Wood and Fair Oaks.

Diversification Opportunities for John Wood and Fair Oaks

-0.94

Correlation Coefficient

John Wood  Fair Oaks

Pay attention - limited upside

The 3 months correlation between John and Fair is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding John Wood Group and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income and John Wood is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on John Wood Group are associated (or correlated) with Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of John Wood i.e., John Wood and Fair Oaks go up and down completely randomly.

Pair Corralation between John Wood and Fair Oaks

Assuming the 90 days trading horizon John Wood Group is expected to under-perform the Fair Oaks. In addition to that, John Wood is 12.45 times more volatile than Fair Oaks Income. It trades about -0.01 of its total potential returns per unit of risk. Fair Oaks Income is currently generating about 0.07 per unit of volatility. If you would invest  55.00  in Fair Oaks Income on December 28, 2024 and sell it today you would earn a total of  2.00  from holding Fair Oaks Income or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

John Wood Group  vs.  Fair Oaks Income

John Wood Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days John Wood Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, John Wood is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fair Oaks Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with John Wood and Fair Oaks

The main advantage of trading using opposite John Wood and Fair Oaks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Wood position performs unexpectedly, Fair Oaks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fair Oaks will offset losses from the drop in Fair Oaks' long position.

The idea behind John Wood Group and Fair Oaks Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.